CLA 02 RR:CR:SM 560609 RSD
Robert Noell, Vice President
Cain Customs Brokers
Texano Industrial Park
415 S. Industrial
P.O. Box 150
Hidalgo, Texas 78557
RE: Applicability of the partial duty exemption pursuant under HTSUS subheading 9802.00.80 to coaxial attenuators processed in Mexico; eligibility for preferential NAFTA treatment
Dear Mr. Noell:
This is in response to your letter dated July 31, 1997, on behalf MCE Manufacturing Corporation, (hereinafter MCE) concerning the eligibility for a partial duty exemption under subheading 9802.00.80, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), for fixed coaxial attenuators imported from Mexico. In addition, you also inquire about whether the attenuators would qualify for preferential tariff treatment under the North American Free Trade Agreement (NAFTA). You made a supplemental submission dated August 22, 1997. The submission contained copies of manufacturers’ affidavits, which indicate that the components for the attenuators were manufactured in the United States.
FACTS:
MCE plans to begin importing fixed coaxial attenuators from Mexico at Hidalgo, Texas. You describe the fixed coaxial attenuators as devices that function as passive radio frequency mechanisms reducing the strength or amplitude of radio frequency signals. The devices are comprised of a metal housing (barrel), resistors, and threaded connectors.
The assembly processes involved in producing the attenuators are described as follows:
1) A coupling nut spring is placed around the slot in the plug body and a rubber gasket is slipped onto the “pin end” of the plug body. The coupling nut is placed in a fixture threaded end down. The plug body is then placed threaded side up into
the coupling nut. The coupling nut spring is compressed and the plug body is pressed into the coupling nut until the spring expands into a groove in the coupling nut.
2) In the next step, using tweezers, the contact spring is placed into the center contact on both male and female connectors. The plunger is placed, slotted side up into the center contact on both the male and female connectors. The smooth movement is checked. The nail smaller OD end is placed into the plunger, which is in the center contact on the male and female connectors and the smooth operation is checked again.
3) The ground spring is placed into the slot in a fixture open end up. The ceramic resistor is placed into the ground spring until it snaps into place. If the ceramic resistor receives two ground springs, this process is repeated on the other side of the ceramic resistor.
4) The spacer is placed in a fixture and the ceramic resistor is slid into the slot of the spacer.
5) The barrel is threaded onto the male connector by approximately three turns. The spacer is placed into the barrel. Holding the male connector and the barrel in a semi-horizontal position, the female connector is slowly threaded into the other end of the barrel. The attenuator is hand tightened until firmly mated and it is checked to see that the distance from the barrel to the connector body is approximately the same. The connectors are tightened with a wrench. The radio frequency is electronically checked.
6) The attenuators have loctite applied to the threads of the connectors where the barrel and the connectors meet.
7) A nameplate is attached on the outside of the barrel of the attenuators.
8) The attenuators are packed for shipment.
You have also submitted 12 affidavits from the manufacturers of the components that make up the attenuators. In the affidavits, the manufacturers certify that the components were manufactured at facilities located in the United States.
ISSUES:
1. Whether the attenuators will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when they are imported into the United States.
2. Whether the attenuators will qualify for preferential tariff treatment under NAFTA.
LAW AND ANALYSIS:
Subheading 9802.00.80
Subheading 9802.00.80, HTSUSA, provides a partial duty exemption for:
[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubrication, and painting.
All three requirements of subheading 9802.00.80, HTSUSA, must be satisfied before a component may receive a duty allowance. An article entered under this tariff
provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 C.F.R. §10.24).
Section 10.16(a), Customs Regulations (19 C.F.R. §10.16(a)), provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as gluing, laminating, welding, soldering, riveting, force fitting, sewing, or the use of fasteners. Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. Examples of operations which are incidental to the assembly process include trimming, filing, or cutting off of small amounts of excess materials. See, Section 10.16(b), Customs Regulations (19 C.F.R. §10.16(b)). However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See, Section 10.16(c), Customs Regulations (19 C.F.R. §10.16(c)).
The operations described above performed in Mexico which result in securely joining components together by inserting, force fitting, snapping, pressing, screwing, and tightening are considered acceptable assembly operations pursuant to 19 C.F.R. §10.16(a). Applying loctite to the threads of the connectors where the barrel and connectors meet is also an acceptable operation pursuant to 19 C.F.R. §10.16(a). See HRL 555553 dated April 11, 1990. In addition, the checking to make sure that the components function smoothly and that the radio frequency is correct are considered to be operations incidental to assembly pursuant to 19 C.F.R. §10.16(b)(7). See HRL 556974 dated February 17, 1993. Moreover, pursuant 10.16(f), packing the attenuators for shipment is a permissible operation, which will not disqualify the attenuators from the partial duty exemption under subheading 9802.00.80, HTSUS. Consequently, the attenuators may enter the U.S. under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the U.S. components therein, provided the documentary requirements of 19 C.F.R. §10.24 are satisfied.
NAFTA Preferential Tariff Treatment
The second issue which you raise is whether the imported attenuators are entitled to preferential tariff treatment under North American Free Trade Agreement (NAFTA).
General Note 12, HTSUS provides in pertinent part that:
(b) For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if--
(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that--
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note;
or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials....
The phrase "goods wholly obtained or produced in the territory of Canada, Mexico and/or the United States", means, in pertinent part:
(i) mineral goods extracted in the territory of one or more of the NAFTA parties;...
(x) goods produced in the territory of one or more of the NAFTA parties exclusively from goods referred to in subdivisions (n)(i) through (ix), inclusive, or from their derivatives, at any stage of production.
See, General Note 12(n), HTSUS. "Production" is defined in General Note 12(p), as "growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good."
You claim that all the components in the attenuators are NAFTA originating materials. In support thereof, you have submitted affidavits from the manufacturers of the components which are used to make the attenuators, indicating that the components were manufactured at various facilities located in the United States. While the affidavits you have provided by themselves do not establish that the components of the attenuators are NAFTA "originating materials" pursuant to General Note 12, HTSUS, we will assume for the purposes of this ruling that all the components of the attenuators are originating materials. Therefore, as the attenuators are made entirely in Mexico from originating materials, they qualify as originating goods under General Note 12(b)(iii), HTSUS.
General Note 12(a)(ii) further provides, in pertinent part, that:
(ii) Goods that originate in the territory of a NAFTA party under subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules set forth in regulations....and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn followed by the symbol “MX” in parentheses are eligible for such duty rate....
Thus, under General Note 12, the eligibility of a particular article for the NAFTA duty preference is predicated, in part, upon whether the article is determined to be a good of Canada or Mexico under the NAFTA Marking Rules. In other words, goods are entitled to the NAFTA preferential rate of duty if they are NAFTA “originating” and they qualify as goods of Canada or Mexico under the terms of the marking rules set forth in the regulations.
Section 102.11, Customs Regulations (19 C.F.R. §102.11), sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for the purposes of country of origin marking and determining the rate of duty and staging category applicable to an originating good as set out in Annex 302.2. Paragraph (a) of this section states that the country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change
in tariff classification set out in section 102.20 and satisfies any other applicable
requirements of that section, and all other applicable requirements of these rules
are satisfied.
“Foreign material” is defined in 19 C.F.R. §102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the attenuators are assembled in Mexico of U.S. materials and therefore are neither
wholly obtained or produced, nor produced exclusively from domestic materials. Since an analysis of sections 102.11(a)(1) and 102.11(a)(2) will not yield a country of origin determination, we look to section 102.11(a)(3).
Section 102.11(a)(3) provides that the country of origin is the country in which “each foreign material incorporated in that good undergoes an applicable change in tariff classification as set forth in 19 C.F.R. §102.20....”
We have been advised by the National Import Specialist that the completed attenuator is classified at subheading 8533.10.0065, HTSUS. The applicable tariff shift rule found in section 102.20(o) provides as follows:
HTSUS Tariff Shift and/or other requirements
8533.10-8533.40.....A change to subheading 8533.10 through 8533.40
from any other subheading, including another subheading
within that group.
In the instant case, the foreign materials are a label (classified at subheading 3919.10, HTSUS), a barrel (classified at subheading 7318.19, HTSUS), a spacer (classified at subheading 7318.29, HTSUS), a ground spring (classified at subheading 7320.90, HTSUS), a resistor (classified at subheading 8533.10.0065, HTSUS), a plunger contact (classified at subheading 8538.90, HTSUS), spring (classified at subheading 7320.20, HTSUS), female connector (classified at subheading 8536.69, HTSUS), male connector (classified at subheading 8536.69, HTSUS), spring washer (classified at subheading 7320.90, HTSUS), coupling nut (classified at subheading 7318.19, HTSUS) Plunger (classified at subheading 8538.90, HTSUS), and gasket (classified at subheading 4016.93, HTSUS).
One of the foreign materials in the attenuator, the resistor, does not undergo the applicable tariff shift because both the resistor and attenuator are classified in subheading 8533.10, HTSUS. Therefore, the requisite tariff classification change for an article classified in subheading 8533.10 HTSUS cannot be met in this case.
The next step in the hierarchy, 19 C.F.R. §102.11(b), states in pertinent part that:
Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section:
(1) The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good...
. . .
Section 102.18(b)(1) Customs Regulations, states that:
For purposes of identifying the material that imparts the essential character to a good under § 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good. For purposes of this paragraph (b)(1):
. . .
(iii) If there is only one material that is classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good, then that material will represent the single material that imparts the essential character to the good under § 102.11.
Applying section 102.18(b)(1)(iii) to the facts of this case, the resistor is the only material in the attenuators that is classified in a tariff provision from which a change in tariff classification is not allowed under the specific rule indicated in § 102.20. Therefore, the resistor is the single material that imparts the essential character of the attenuator and its country of origin will determine the country of origin of the finished article. As you state that the country of origin of the resistor is the United States, we find that under 19 C.F.R. §102.11(b) the attenuator is a good of United States.
However, according to the terms of section 102.19(b), Customs Regulations (19 C.F.R. §102.19(b):
If, under any other provision of this part, the country of
origin of a good which is originating within the meaning of section
181.1(q) of this chapter is determined to be the United States
and that good has been exported from, and returned to, the
United States after having been advanced in value or improved in condition in another NAFTA country, the country of origin of
such good for Customs duty purposes is the last NAFTA
country in which that good was advanced in value or
improved in condition before its return to the United States.
As the processes performed in Mexico, assembling the components of the attenuators, clearly advances them in value and improves them in condition, 19 C.F.R. §102.19(b), is applicable, and the country of origin of the attenuators, for duty purposes, is Mexico. Thus, the imported attenuators are entitled to NAFTA preferential treatment at the “MX” rate, assuming a Certificate of Origin (See 19 C.F.R. §181.11) is completed and signed for the goods.
HOLDING:
On the basis of the information provided, it is our opinion the operations to be performed in Mexico to create the attenuators are proper assembly operations or operations incidental to assembly pursuant to subheading 9802.00.80, HTSUS. Therefore, allowances in duty may be made under this tariff provision for the cost or value of the U.S. origin components upon compliance with documentary requirements of 19 C.F.R. §10.24. In addition, based on your contention that all the components used to make the attenuators in Mexico are NAFTA originating materials, we find that the imported attenuators are eligible for the NAFTA tariff preference at the “MX” rate.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division